Quit Claim Deed & Mortgage: What You Need to Know
A quit claim deed transfers the grantor's ownership interest in real property, but it does not automatically transfer, eliminate, or change the mortgage attached to that property. The mortgage and the deed are separate legal instruments, and understanding their relationship is critical before conveying property.
The Deed vs. the Mortgage: Two Separate Documents
When you own a property with a mortgage, two legal obligations exist: the deed (which proves ownership) and the mortgage note (which is the debt agreement). A quit claim deed transfers only your ownership interest. It does not pay off the loan, assume it, or release you from liability.
If you transfer property via quit claim deed while a mortgage is still attached, the mortgage remains. The property is still encumbered by the lien. The new owner receives the property subject to that mortgage debt, and the original borrower(s) typically remain personally liable for the loan unless specific steps are taken to release that liability.
Due-on-Sale Clauses
Most mortgages contain a "due-on-sale" clause, which allows the lender to demand immediate repayment of the entire loan balance if the property is sold or transferred. This clause exists to protect the lender's interest and to give them the chance to review the new owner's creditworthiness.
In general, transferring property via quit claim deed can trigger a due-on-sale clause. Whether the lender actually enforces it depends on the lender's policy and the specific circumstances. Some lenders actively monitor transfers; others may not. If enforcement occurs, the lender can declare the loan due in full, which often forces a refinance or sale to pay off the balance.
There are limited exceptions to due-on-sale enforcement under federal law (the Garn-St Germain Depository Institutions Act). Generally, transfers to spouses, children, or other direct family members in the context of divorce or estate settlement may not trigger the clause in some states, but this varies by jurisdiction and lender policy. The lender may still require notice and approval. Consult a licensed attorney in your state to confirm whether an exception applies to your situation.
Grantor Liability After Transfer
When you convey property via quit claim deed, you are transferring your ownership claim, not your debt obligation. In most cases, the original borrower remains liable for the mortgage debt even after the deed is recorded in another person's name.
This liability typically continues until one of the following occurs:
- The loan is paid in full
- The new owner formally assumes the mortgage (with lender approval)
- The lender releases the original borrower through a formal loan modification or substitution agreement
- The property is sold and the proceeds pay off the balance
A quit claim deed alone does not release the grantor from mortgage liability. If the new owner fails to make payments, the lender can pursue the original borrower for the debt, because the original borrower's name is still on the promissory note.
What Happens to the Property
The new owner receives the property with the mortgage lien still attached. They are not personally liable for the debt unless they formally assume the mortgage. However, if they fail to pay the mortgage, the lender can foreclose on the property, regardless of who owns it. This means the new owner could lose the property even though they did not sign the original loan documents.
This situation is sometimes called taking property "subject to" the mortgage, which is different from assuming the mortgage.
Assumption vs. Subject To
Subject To: The new owner takes the property but does not assume the mortgage debt. The original borrower remains liable. The lender's lien stays on the property.
Assumption: The new owner formally agrees to take over the debt obligation with the lender's consent. The original borrower is typically released from liability (though some lenders require a full substitution agreement). The new owner becomes the primary obligor on the note.
A quit claim deed typically conveys property "subject to" any existing mortgage unless you have already arranged a formal assumption with the lender. Most lenders require a credit check and formal application before allowing assumption.
State Variations
Mortgage law varies by state. Some states have community property rules that affect how property is divided in marriage. Other states have specific protections for family transfers. Requirements for recording, lender notification, and title search procedures also differ. Consult a licensed attorney in your state to understand how your state's laws apply to your situation.
Key Takeaways
- A quit claim deed transfers ownership but not the mortgage debt
- The due-on-sale clause can be triggered by a quit claim deed transfer
- The original borrower typically remains liable unless formally released
- The new owner receives property "subject to" the mortgage unless they assume it
- Confirm with your lender before transferring property with an outstanding mortgage
- Consult a licensed attorney to ensure the transfer complies with your state's laws